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Inflation rate concerns Varga, MNB deputy governor

MNB

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National Economy Minister Mihály Varga on Thursday said the economy is in “top form” and the country’s fiscal position is good, but he acknowledged that the government must deal with the expected shortfall in budget revenue due to low inflation. 

Varga told commercial television channel Hír TV yesterday evening that Hungary’s 3.5% first-quarter GDP growth was excellent in comparison with other European countries, and the structure of growth was broader. He also reaffirmed the government’s commitment to strengthening growth while reducing state debt and keeping the general government deficit under the 3%-of-GDP European Union threshold.

“The Hungarian budget is fine,” said Varga. “There is one factor that we have to deal with: That is inflation.”

Considering Hungary’s low inflation rate, he said the National Bank of Hungary (MNB) still has room for further easing, adding that the question was in the scope of power of the central bank’s rate-setters. “Obviously, the central bank is weighing the effects, but one has to be glad, in any case, that the economy can grow at such a significant pace with such low inflation,” he said.

Hungary posted an inflation rate of -0.1% for April, the first negative rate in over 40 years. The MNB has cut its key rate, although at a slower pace recently, each month since August 2012.

Speaking of the MNB, Varga’s comments of today were similar to concerns noted by MNB deputy governor Ádám Balog yesterday. At a press conference following the announcement of the bank’s new statute, Balog stated that the recent wave of low inflation figures has “surprised Europe and even the MNB,” adding that this was a problem throughout Europe.

“I do not feel at ease with these developments,” he said, adding that the European Central Bank (ECB) is also apparently nervous.

– Material from national news service MTI was used in this article

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